Capitalism Comes to Afghanistan

(2 of 2)
R

awn defends Coca-Cola's $25 million investment in Afghanistan, saying the objective was not just to make money, but also to help industrialize the country. "If you plant a tree you can't expect to have fruit the first day. But if you don't plant at all, you will never have fruit." That sentiment is shared by Shakib Noori, p.r. director of the Afghanistan Investment Support Agency, the country's business-licensing body. Afghanistan imports some $5 billion worth of goods every year, and "half of those products could be produced here in Afghanistan," says Noori. "Dairy, foodstuffs, cement—there are huge opportunities, but the problem is that there is no infrastructure." Most of the country is out of reach of an electrical grid. Even in Kabul, residents receive just three hours of electricity a day. Although a national highway system is scheduled to be completed by 2010 and a planned electrical line from Tajikistan and Uzbekistan in the north could light up Kabul by 2008, Afghanistan's unstable political situation is a further deterrent to foreign investment.

Government corruption is also a formidable obstacle, as it is in many developing countries. "If you need land, you have to pay a bribe," says Kazimi, the former Commerce Minister. "Electricity, you have to pay someone off. To import goods, you have to pay baksheesh. Everyone has a 'tax.'" Those who refuse to pay risk losing out to their business rivals. When Roshan, a cellular-phone company jointly owned by the Geneva-based Aga Khan Development Network, Monaco Telecom and MCT Corp. of the U.S., began building a network in Afghanistan in 2002, transmission equipment languished in customs for months, says Roshan CEO Karim Khoja, because the company refused to pay bribes. Leases on prime land were also lost, and bureaucrats demanded free airtime and SIM cards, says Khoja.

Yet Khoja adds that it's certainly possible to operate a clean business and succeed in Afghanistan. Roshan is the largest carrier in the country. It has a million customers, a market share of about 60% and generated revenues of $100 million in its 2005 fiscal year. But to get there, Roshan had to make plenty of adjustments. Afghanistan has no functioning mail system or credit-card services, so billing methods prevalent in the West couldn't be used. Instead, customers get airtime by purchasing prepaid calling cards from roughly 4,000 vendors who are Roshan franchisees. In Kabul, the vendors, most of them selling cards on the street, earn about $100 a month, much more than most laborers. "We are creating an entrepreneurial middle class," says Khoja. Roshan is also helping to entertain the masses by sponsoring one of Afghanistan's most popular TV shows, a knockoff of American Idol called Afghan Star, which follows aspiring celebrities as they perform for a national audience. Viewers vote for their favorites by sending messages via their mobile phones. The revenue generated by the additional traffic is split between Roshan and programmer Tolo TV.

Supporting such programming in a pious country was a gamble. Under the Taliban, musical performances were banned. So was TV. But today, media company Moby Capital Partners, owner of Tolo TV, is prospering. Tolo TV's mix of news, sports, music, reality shows and Indian soap operas draws nearly two-thirds of the country's viewers, according to a recent survey by a Kabul consulting company. Tolo, one of six private stations in Afghanistan, has drawn the ire of conservatives who decry its use of female presenters. But its programs appeal to young Afghans (half the population is below the age of 20), and advertisers are stepping up. Saad Mohseni, an Afghan exile who spent most his adult life as a stockbroker in Australia before returning in 2002 to found Moby, estimates that the country's ad spending on all media is currently around $10 million a year. Capturing that revenue, he says, is simply a matter of taking a chance and getting the formula right.

A handful of foreign investors have been willing to take their chances. Foreign direct investment increased by 35% in 2005 to $253 million, according to the ADB, putting Afghanistan on par with a country like Sri Lanka. Besides Coca-Cola, multinational firms such as DHL, Standard Chartered Bank, the Hyatt hotel group, Toyota and Alcatel have also set up Afghan operations. In hope of convincing more to take the plunge, the ministry of commerce is reassessing tax laws, and groups like Afghanistan Investment Support Agency are helping to build industrial parks to encourage manufacturing. A steady rise in consumer spending should also boost the economy—for nearly 30 years, Afghans have been deprived of basic consumer goods, and they are eager to catch up. President Karzai, not surprisingly, has been eager to draw attention to these rays of economic sunshine. "Whoever invested in Afghanistan in the past four years has earned a lot," he said a few months ago at a conference to attract foreign investment. "Those who invest now in the still fresh, needy, greedy market in Afghanistan will make a lot."

He may be right. One thing is for sure: the nation's yearning for a better future has never been more intense. Just ask Khan as he waits in line to open his account at Azizi Bank: "The economy is moving forward. Afghans are hungry. We are tired of war and we want to buy. We want to build. But I hope there is no more fighting—if that happens it will destroy everything."